Unformatted text preview: principal or initial investment. 5. What is the meaning of discounting? Give an illustration. Discounting is an arithmetic process whereby a future value decreases at a compound interest rate over time to reach a present value. 6. Briefly explain how present values and future values are related. PV = FV / (1 + r) n and are two ways of looking at the same process involving compound interest rates. If we know the future value of an investment, we can find its present value and vice versa....
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 Spring '11
 MinLiu
 Accounting, Finance, Interest Rates, Time Value Of Money

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